The paper "Australian Governance Policies" is a wonderful example of an assignment on macro and microeconomics. After the end of the Second World War, the Australian financial system was highly regulated with the commonwealth government having a say in many issues regarding the way that banks and other financial institutions conducted their business. According to Fitzgibbons (2005), this regulation allowed the commonwealth government to determine the amount, type, and costs of the bank's services. It also gave the government the power to control the foreign exchange and the entry of foreign banks into the country.
This structure lasted until the 1970s when the deregulation process started. The process mainly entailed The Campbell Inquiry, which was supposed to look into the existing system and provide a report that made certain recommendations and suggestions. When the inquiry completed its report in 1981, it called for a process of extensive deregulation, because it believed that such a process would increase competition in the system and give it the competence of a free market (Fitzgibbons, 2005). Structure before DeregulationBefore the government initiated the process of deregulation, there was a wide range of controls on the financial system.
These regulations varied widely but they were mainly focused on the banking system and related sectors. One of the controls dictated the interest rates that the banks could apply to loans. This meant that the rates were largely similar for different institutions. In another regulation, the government subjected banking institutions to reserve and liquidity ratios. The authorities also issued directives concerning the general amount of loans, sometimes even going as far as to impose moral perspectives on the institutions regarding the entities that should be granted the loans and those that should not (Battellino, 2007). The government had instituted these deregulations for a number of reasons.
One of the aims of the controls was to give the authorities a way of controlling the monetary aspect of the economy. The regulations also created a captive market specifically for government securities (Battellino, 2007). Through this market, the government had the ability to fund its own operations. The controls allowed the government to place a limit on the kind of risks that Australian banks could take.
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